And pardon me, ladies and gentlemen, we apologize for the technical delay. We're now ready to begin. And welcome to the Century Casinos Q1 2021 Earnings Conference Call. This call is being recorded. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

I would like to introduce our host for today's call, Mr. Peter Hoetzinger. Mr. Hoetzinger, you may begin..

Hello? It seems -.

And Mr. Hoetzinger, you may begin..

Hello. Good morning, everyone, and thank you for joining our earnings call. With me on the call are my Co-CEO and the Chairman of Century Casinos Erwin Haitzmann as well as our Chief Financial Officer, Margaret Stapleton.

As always, before we begin, we would like to remind you that we will be discussing forward-looking information which involves a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements.

Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. We provide a detailed discussion of the various risk factors in our SEC filings, and encourage you to review these filings.

In addition, throughout our call, we refer to several non-GAAP financial measures, including but not limited to adjusted EBITDA. Reconciliations of our non-GAAP performance and liquidity measures to the appropriate GAAP measures can be found in our news release and SEC filing available in the Investor section of our website at cnty.com.

I will now provide an overview of the first quarter results. And after that, there will be a Q&A session. Adjusted EBITDA for the quarter was $14.7 million, an increase of 53% over the first quarter of last year compared to EBITDA of Q1 2019.

Results were driven almost exclusively by our properties in the US because our casinos in Canada were closed for the entire quarter, and in Poland, they were closed for most of the quarter. Without disclosures, we estimate our adjusted EBITDA would have been around $22 million. So yes, it was a great quarter. January and February were good.

March was exceptional. And it is great to see that strength continuing into April and early May. As most other local and regional casinos, we are benefiting from pent-up demand. Well, actually, I'm not sure if we can call it that, because that strong demand has been around since June, so almost a year now.

But anyway, we are benefiting from strong demand from easing restrictions, from the vaccine rollout which is driving the older demographic back to the Casinos, from strengthening consumer confidence, from the preference for close to home entertainment, and from the fiscal stimulus.

All of that has improved visitation as well as spending levels with our casinos, and together with our disciplined and efficient operating strategy, contributed to these great results across our portfolio.

We are confident we can keep delivering strong performances throughout the rest of the year, especially when looking at the very important 60-plus demographic segment. That lucrative 60-plus old customer only started to return very recently, indicating more upside ahead.

We've seen some growth from this demographic in March, but many was still cautious and remained on the sidelines. That is changing. And as COVID vaccinations continue to rollout and restrictions lift, we expect visitation to improve further as the year progresses.

We've also benefited from new player sign-ups, especially at our three new properties in West Virginia and Missouri, where new sign-ups were 30% higher than in Q4 2020. And the worth of these new players was even more impressive. It was 41% higher compared to the first quarter of 2019.

This influx of new players is providing us the great opportunity to grow our database, identify high-value players and convert them to loyal regular visitors. The strong revenue trajectory coupled with a substantially reduced fixed cost base translate to continued meaningful EBITDA levels well ahead of 2019 benchmarks.

Other than the positive revenue trend, the big question is whether the high operating margins are sustainable. For the third quarter in a row, we have been able to achieve high operating margins, and yes, we do believe that will continue to be attainable.

High operating margins depend on high revenues and a disciplined approach to operating costs and expenses. We believe we will see sustained margin improvement relative to 2019 levels through more efficient marketing practices, reduced labor costs, and the elimination of certain margin dilutive amenities.

Savings come from many areas, including but not limited to promotions, direct mail advertising, outside hotel comps and cost of goods sold, especially in F&B.

Should competing operators get more aggressive with promotional activity or even start bringing back margin dilutive non-gaming amenities that have been scrapped during COVID, that could have an impact on our margins.

This is something we have to watch out for, but at this point, we haven't seen any significant impact in any of our markets even as other entertainment options, Las Vegas for example have started to come back quite strongly. This is encouraging and has continued into April and early May.

But clearly, revenue trends have the biggest impact on whether those margins will stay up or go down a little bit. And that makes us feel good as we expect a significant amount of true pent-up demand from the 60-plus demographic as mentioned. The play levels of that demographic are kicking in, as we speak and support and boost regional gaming revenue.

And most importantly, the EBITDA flow through should continue to be strong, as the marketing spend behind this player base is pretty limited. Let's now look at the first quarter performance of each reporting segment, starting with Colorado.

It was a fantastic quarter for our properties in Cripple Creek and Central City, with both casinos clearly outpacing even pre-COVID levels. Net operating revenue was up 40% over 2020, and it was up 17% over 2019, in spite of capacity restrictions throughout the quarter. Adjusted EBITDA was up four-fold over 2020, and it was up 62% over 2019.

The EBITDA margin jumped to a first quarter record of 33%. In Colorado, each county has different gaming flow restrictions. In Cripple Creek, the full slot floor and about half of the table game positions were opened during the quarter.

In Central City, the casino was operating approximately two-thirds of the slot machines and half of the table game positions. Our market share went up in both markets, in Cripple Creek from 10.6% to 12.3% and in Central City from 27.4% to 30.8%.

We anticipate continued strong performances in the summer months and see further upside from two more sports betting launches and we see growth in table game revenue from new games and higher limits. So far, only one out of three sports betting partnerships is up and running. The other two plans will launch later this year.

All three partnerships pay as a percentage of revenue, with a minimum guaranteed amount per year. That's without any investment or cost participation from our side. So, it flows straight to the bottom line. Moving on to Missouri, which is our most important market in terms of EBITDA and cash flow generation.

And our two properties in Cape Girardeau and Caruthersville, also machines are in operation, but only 54% of our table game positions are available for play. As a result, for the quarter, they're again fantastic. Net operating revenue was up 44% over 2020, and it was up 27% over 2019.

Adjusted EBITDA was up 2.5 times over 2020, and it was up 77% over 2019. The EBITDA margin jumped to a first quarter record of, listen to this, 49.7%, truly remarkable. The Cape Girardeau slot revenue in the quarter was the highest quarterly slot revenue in that property's history.

The month of March was a record-setting month for the property in several areas. Slot revenue and total revenue were both monthly records. March also hit the highest monthly guest counts seen at the property since reopening in June. F&B cash revenue was at its highest monthly total since reopening, but I'm seeing only minimal increases in comps.

Table top and revenue has a lot of upside still, as we were operating at reduced capacity and with restrictions such as no eating, drinking or smoking at gaming tables. We continue to get very good customer feedback for the new mobile app.

The ad focuses on increasing customer engagement and provides guests access to all amenities and promotions with full account visibility and the ability to take advantage of rewards and offers. And for us, that means lots of opportunities to further increase customer loyalty and also save significantly on direct mail expenses.

In the not-too-distant future, Missouri could legalize online sports gaming and betting and iGaming, which could bring additional revenue and EBITDA upside for us in debt markets. Next is West Virginia, where we operate the Mountaineer Casino, Racetrack & Resort. Adjusted EBITDA doubled compared to Q1 2020, but was down 25% compared to 2019.

This is not surprising, because of a temporary smoking ban and a curfew in Ohio, where the majority of Mountaineer's business comes from. Currently, the gaming floor offers about 94% of the slot machines and 47% of table game positions for play. Some of the F&B outlets are open with limited hours of operation.

The convention space remains closed, and the hotel is operating with limited capacity. Because of its resort destination character, Mountaineer usually draws quite a lot of its business from customers staying for a night or two, which was difficult in the last 12 months.

But now, especially since March, we see a strong uptick in business, which we believe is directly linked to more people getting their vaccinations and feeling comfortable getting out of the house for short trips, overnight stays. So, we've started to see first indications that the regional destination business is returning.

Hotel reservations have increased to the highest level in more than a year. In fact, preliminary numbers for April show EBITDA exceeding 2019 numbers. These are early days still, but we may see a great come back of that property as the year progresses.

And our online casino gaming has gone live in April in partnership with Rush Street Interactive and William Hill. Internationally, our operations in Poland were closed for most of the quarter. We operated for a couple of weeks in March only. And the very latest news we got this morning point to an opening in early June.

Monthly cash flow is about $1million. As already reported, we are in talks with several parties about the sale of the Polish casinos. And as of today, we can't predict the outcome of these negotiations. It takes time, but we are pretty certain that we will have a more precise update for you in our next earnings call.

And in Canada, we were closed for the entire quarter. We currently anticipate reopening sometime next month, early mid-June, but that's speculation at this point in time. Hospitalizations and vaccination rollouts as a percentage of the population are the key factors for reopening. Vaccination distribution is gaining ground.

It's about - at 30% at least the first dose. The monthly cash burn is about $1.4 million, while we are closed. Once we are allowed to reopen, we expect to realize labor efficiencies with limiting amenities to actual customer demands, which should result in increased EBITDA margin.

Additionally, the potential licensing for online sports betting in Canada could provide significant upside for us in the province of Alberta, where we have four out of 28 licenses. That concludes the round-up of operations. Now a few words about our balance sheet, liquidity and outlook.

As of the end of March, we had $66 million in cash and cash equivalents and $184.4 million in outstanding debt on our balance sheet, resulting in net debt of $118.4 million.

The outstanding debt included $167.9 million related to the Macquarie Credit Agreement, $9.9 million of bank debt in Europe, $15.5 million related to a long-term land lease for Century Downs in Canada and a net of $8.9 million in deferred financing costs. We are going ahead with select CapEx projects, mostly new slot product.

Other than that, all our properties are in good shape and do not need any substantial investment. Overall, our business has been remarkably strong, with almost all of our revenue coming from customers who live within a 1.5 hours drive from our properties. We have successfully executed a strategy built on our premium local customers.

Going forward, we will stay firmly committed to our operating strategy, driving increased EBITDA as a result of continued operating discipline and a tight focus on the right customer.

Even as other gaming entertainment options, in particular Las Vegas, are starting to come back, we believe high margins will be sustainable in the regional and local casino markets and our performances in April and early May seem to indicate that.

In terms of our online business, we continue to be excited by the opportunity presented by sports betting and iGaming. It's a highly promotional and competitive landscape, but sports betting and iGaming already generating positive cash flows for us.

We believe our partnerships with Circa Sports, William Hill, bet365, Rush Street and Tipico are the right approach right now. It gives us guaranteed income without investment and also let us learn a lot about the online business. Long-term, however, we may well consider entering the online space and our own brand.

Thereby, enhancing the multi-channel relationship with our customers. With revenue streams from land-based casinos, racetrack and racinos, on and off-track betting as well as sports betting and iGaming, we are developing into a truly multi-channel North American gaming company.

And we are, as we speak, seriously looking at a handful of possible acquisition opportunities, all in the US to further broaden our footprint and leverage our successful operating model.

With that, we look forward to our casinos and racetracks reopening in Poland and Canada and to a busy summer season in North America as the pandemic hopefully subsides.

On behalf of the Company's management and Board, I'd like to thank our team members, our guests and our stockholders for their continued loyalty and enthusiasm as we manage our business during these challenging times. I thank you for your attention and we can now start the Q&A session. Operator, go ahead, please..

Thank you, ladies and gentlemen. At this time, we will conduct a question-and-answer session. [Operator Instructions] And our first question comes from David Bain from B. Riley. Please go ahead. Your line is open..

Great. Thank you and congratulations on the reopening performance today and clearly forward trends there. You know first I was hoping you could help us understand the current M&A environment.

You know, specifically have, you know, given the strong reopening here, have you seen prices tightening? Are they in line with what you've been reviewing previously, you know, product or supply tightened? Or is it the same number of acquirers? As any kind of overall view as to what's going on out there would be really helpful..

Yeah. Thanks, David. We compared to - about a year ago, there are certainly fewer properties on the market. But surely, at least between half a dozen and dozen out there that are of interest to us and could very well fit into our portfolio.

In terms of valuation and price levels, it is very difficult, if not unlikely that you get a deal done on the same terms that we have done our appeal over a year ago, where we actually paid, was it around four times or so. But how we look - we go in with our people, with our teams and do due diligence and we come up with an EBITDA number.

EBITDA that we think we can do with that property. And based on that, we apply a market that works for us. Because looking at current numbers or last year's numbers, especially these days, it's just extremely difficult. So, we try to stay away from that and come up with our own estimates and apply marketable.

So, the landscape is a little bit smaller than it was a year ago, but still very attractive targets out there..

Okay, awesome. And this one is going to be short, so I'm hoping I can ask a brief third as well, but I think it'll be short anyway. I know it's early days.

Any antidote on the table max that lift? Any new games in Colorado under Amendment 77?.

Erwin?.

Yes, this is Erwin. We take a cautious approach. We have set a maximum bet at $500. And on the first half opening, we saw action going up to $500. Overall, we have the feeling that it will take a little while until that market up there higher end players not only at our base, but in general in Colorado.

With the exception of a few back tables here and there, no other new games have been added anywhere or at least not yet. So like I say, it's early days and I think amounting to the exercise, we will be able to say something more definitive..

Okay, great. And this is the final one, promise.

If Canada reopens, are there any different dynamics to think about versus your strong US reopening? I assume we don't know capacity restrictions out of the gate, things like that, but our drivers generally align from both the structural margin and overall reopening similar to the US or is there anything else that we should think about in Canada, if that reopens?.

I think we'll see the US openings kind of mirror. We will again be cautious with the site offerings everything other than the non-gaming offerings and [indiscernible] cost and EBITDA conscious.

We think that we'll definitely do really pent-up demand and we would hope that if and when we are permitted to open that we can produce interesting numbers right from the get go.

Just as I had mentioned, as much of a hindrance as it basically can, if we have a limitation on slot machines, it may - we have seen in some markets that even if we had a few restrictions here or there, we could still produce fantastic numbers simply because the people were playing longer and more..

Awesome. Okay. Thanks so much, guys..

Thank you. Our next question comes from Chad Beynon from Macquarie. Please state your question..

Hi. Good afternoon, and thanks for taking my question and congrats on nice quarterly results. I know you mentioned that Poland is kind of influx here, the talks are still ongoing. You mentioned that the property is due to open actually this week.

After we start to - I guess, the first question, should we expect that the demand comes back quickly? Can you remind us in terms of what restrictions would be when that opens up? And then once it's open and kind of running normally, should that propel the discussions that you're having in terms of divesting the property? Thank you..

When we issued the news release that was up until last night or around midnight or so. They told us that we that we will most likely be allowed to open tomorrow but then this morning, they changed that and postponed it for another four weeks. So it is early June now.

Once we are allowed to reopen, we do expect that especially in the casinos outside of Warsaw, which are truly local and regional casinos that there will be a lot of pent-up demand and that will translate into to revenue and EBITDA right away from the get go.

The casino is in Warsaw have traditionally also drawn from international business travelers, and that's about between 20% and 30% of the business there in the Warsaw casinos and that may not come back as quickly as their local business.

Erwin, would you like to add?.

Yeah. I would say - I mean, I agree with what you say. And with regard to the question of which restrictions we expect, it's hard to say, we really don't know, maybe there will still be an obligation to wear a mask, but we don't. If we had to guess, then we would say nothing other than that, but it's speculation, we don't know..

Great, thank you.

And then just on a potential change in your online strategy, is this something that would come with a lot of additional costs? You know, whether it's technology or, you know, if you decide to pivot to this strategy, would you use third-party companies that kind of help with, you know, the sales, the marketing, the technology, all of that, limiting your expenses, but just connecting from a B2C standpoint getting those revenues.

Thank you..

This is Erwin. Going in, we will definitely start with a third-party partner and model in such a fashion that we keep ourselves flexible and possibly as we become more comfortable and get wiser in that space that we might replace step-by-step various services and take them in-house. But that would clearly be revenue and EBITDA-driven..

Great. Thank you very much..

Thank you, Chad..

Thank you. And our next question comes from Jeff Stantial from Stifel. Please state your question..

Great. Thanks, morning, everyone. Thanks for taking our questions. And congrats, really nice quarter. I wanted to start on your Missouri properties, you know, results coming out on the market just continue to be truly incredible.

You know, those two assets are run rating about $60 million of EBITDA which if my math is right here is over double what they were generating before you acquire them, margins, but a big role you cited close to 50%. But top line has also been impressive. So I guess my question is this.

If you think about, you know, some of the short-term tailwind versus the long-term structural changes that you've made to the business, both the you know, in reaction to COVID-19, as well as you know, as you took those assets over from prior ownerships.

How do you see those assets sort of, I guess, “normalizing” out over the course of the year into 2021 or 2022?.

This is Erwin. We think they are pretty normal now. And we don't think that there is much more normalization going on with regard to the numbers, we're very optimistic that we can keep the numbers that we have now..

Okay. Well that's incredible. Great. Thanks. Thanks, and then, you know, for my follow-up, you talked to a number of players sign ups during the quarter, I think it's up 30% versus 2019. If memory serves, I was hoping to unpack that a bit and see if there are any overarching characteristics for these new buyers coming into the database.

Do they tend to skew much younger? You know, what parts of the gaming floor and the broader casino do they gravitate to? Anything to help understand that new player base would be great..

I would say the upper 50% of the purchasing power of our visitors so the more affluent customers. Demographics pretty much the same as we have had it too for those who have it, world class sensation if that is something like an indication..

Okay, great.

And then, you know, along the lines just how those fare you know, I think that was during the quarter just how does that you know, how did that progress with the quarter played out and how is that kind of pieced into April and early March just in terms of new signups still seeing you know, similar levels of strength versus 2019?.

You mean April and early May, right. Yeah, still seeing strength..

Okay, perfect. That's great. Thanks for the color and congrats again, really strong quarter, guys..

Thanks, Jeff..

Thank you..

Thank you. And that concludes our questions at this time. I'll now turn the call back over for closing remarks from Peter Hoetzinger..

Excellent. Thank you. Thanks, everybody for your interest in Century Casinos and your participation in the call. For a recording of the call, please visit the financial results section of our website at cnty.com you have our best wishes for good health. Thanks again and goodbye..

And this concludes today's conference call. Thank you for attending..